Having a background in sociology, philosophy, and economics, I'm going to try to give this blog a pretty broad scope. Going from finance and economics, to geopolitics and world news, to the occasional academic or theoretical post.
I was born in Buenos Aires, Argentina and live in New York, so we'll try to add that into it as well.
Even though I like Adam Smith, don't be surprised if a little Marx makes its way in there as well.
Follow me at @agufonte

Why Is The White House Playing Down A Strong Jobs Report?

With the unemployment rate at its lowest level since December 2008 and the economy adding more jobs than any major analyst estimated in February, it may strike some as odd that the White House chose to play down the number. “It is important not to read too much into any one monthly report,” said the Chairman of the White House’s Council of Economic Advisers, noting the report doesn’t reflect the kicking in of the sequester.

And the White House wasn’t alone in its skepticism. Several analysts highlighted the coming effects of the sequester on income, the continued decline in the labor participation rate (which helps bring down unemployment), and net downward revisions to December and January’s numbers.

Last October, former GE chief executive Jack Welch caused a revolt in Wall Street essentially accusing the Obama Administration of cooking the jobs number, which had fallen below 8% for the first time since the financial crisis, in order to secure reelection. On Friday, though, it was the White House that played down the numbers; Neutron Jack was quiet.

The economy added 236,000 jobs in February, beating the consensus estimate of 163,000 by a wide margin as the unemployment rate fell to 7.7%, as my colleague Steve Schaeferreported. In a statement, Alan Krueger, head of Obama’s economic advisers, highlighted the substantial improvement in labor conditions: the economy added private sector jobs every month for the last three years, he said, adding there had been a 6.35 million increase in jobs over that period. Even manufacturing is coming back, having added over half a million jobs over the past 37 months, the most since 1987.

Yet Krueger remained cautious, as did a big part of Wall Street. “As the Administration stresses every month, the monthly employment and unemployment figures can be volatile, and payroll employment estimates can be subject to substantial revision,” wrote Krueger in his statement, adding this was just a single data point. After warning about the sequester, which is estimated by the CBO to subtract 750,000 jobs, Krueger urged Congress to put the Federal budget on a sustainable track “while making critical investments in the economy that promote growth and job creation and protecting our most vulnerable citizens.”

While the White House may be trying to keep the pressure on Congress, and specifically on House Republicans, other Wall Street analysts were also very cautious about the report.

Jim O’Sullivan of High Frequency Economics, for example, said “the details on the unemployment rate were not quite as positive as the headline.” Acknowledging further strength in the labor market, O’Sullivan highlighted the negative net revision to the numbers over the past two month, which fell by 15,000.

JPMorgan Chase’ Anthony Chan also raised concerns, despite being “excited” by the number. Chan, Chase Private Client chief economist, was worried about the declining labor participation rate, which helped push down the unemployment rate, yet is an indication the economy still faces substantial obstacles. The Fed, he explained, will keep an eye on that number before removing its policy accommodation. “We are very far from the end game,” he said, speaking of Bernanke’s quantitative easing and record low rates.

Along the same lines was Nomura’s research team, which suggested the decline in the unemployment rate was for the “wrong reasons.” Beyond the continued increase in part-time workers, “the 6-month average of monthly job gains inched up to 187k, but the net downward revisions to the prior months suggested that the pace of job creation was not stable.” They also noted that good job gains, without a correlative growth in GDP, will lead to lower productivity. They agree, along with Chan, the Fed is here to stay.

The wild card, as Jim Baird of Plante Moran Financial put it, “is how the consumer sector will respond [to the sequester], and how that impact is distributed across household spending cuts, reduced savings, and increased borrowing.”

The economy is by no means out of the woods yet, Baird said. As I reported yesterday, planned layoffs are on the rise, especially among the financials (JPMorgan and Morgan Stanley have announced jobs cuts) and retail (J.C. Penney is suffering). Wal-Mart, along with others, has warned the consumer is hurting. While the corporate sector appears healthy, as record high stock prices indicate, and the labor market is improving, the boarder economy has yet to pick up. Friday’s report, though, could be a sign of better things to come, yet the sequester looms, as the White House pointed out.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

Comments

While all of the technical issues that you document are no doubt true, this and every other administration in history has never been shy about claiming credit for even slightest good news. The answer to your question is political, the Obama administration does not want anyone to interpret these positive numbers as being the result of the sequestration.

Are an idiot, or just pretending to be. The economy has lost 8.5 million jobs since 2008. The govt. unemployment statistics do not include workers who have given up looking, those whose unemployment claims have run out and those who are underemployed (working part time because they cannot get full time work as well as those who experienced serious pay reductions) The “real” unemployment rate should count everyone in all those categories!

I believe that Mr. Fontevecchia explained, or rather others that he quoted explained quite well, why these numbers are less robust than they might seem. The question at hand is, why did the White House down play the numbers. It is not as if politicians will not claim credit for the sunrise if they can get away with it.

I wish I didn’t have to waste my time with people who just attack for the sake of it. I suggest re-reading the piece and recognizing the a big chunk of the decline in the unemployment rate had to do with a fall in the participation rate, which means people dropping off the labor force.

The Bureau of Labor Statics conducts the Job “Openings and Labor Turnover Survey”[1]. New jobs were overwhelmingly created in the private sector as opposed to the government sector, the south leading the northeast, midwest, and west by a large margin, and “Trade, transportation, and utilities”, “Professional and business services”, and “Leisure and hospitality” leading other sectors.

The nation is slowly getting better from the 2007/8/9 recession even after the Do Nothing congress, worked against our recovery!. had the GOP put the nation, and 97% of Americans over their republican party, principal, values, and their deep seated hatred for the man in the oval office…Fact is we would be at @ 6% unemployment. FACT! Republicans held all three divisions of this nation…2001-2007..house! senate! W.H. ran the nation on NO TAX INCREASES, Deficits don’t matter as VP Cheney stated. Raised “Debt ceiling” 7 times in 8 yrs to cover every bill/law passed…fabricated Iraq war WMD!….Fact is no nation can Spend!. & not raised taxes to pay for running the nation. THEY TRIED IT AND LEFT A 2007 RECESSION. THAT EXTENDED TO END 09…. “Sequester” could not be in force with out the house voting on it first….now!…………..republicans are running to protect their prized cow! the Pentagon….we spend more then China, Russia, & 6 other countries combined., and those sitting in both houses are making money off the Pentagon and 2 wars…………….Republicans need to move out of the 1940′s. have something to offer the nation. The few wealthy are sitting on yrs of tax cuts adding to Trillions…. so if tax cuts create jobs why don’t they invest in this nation, not China and cheap labor………..

Maybe the reason why we spend so much on defense is we have so many self imposed obligations. Why are we still in GERMANY? Or South Korea? Or Djibouti for that matter? We protect the entire world’s sea lanes, which protects our trade and the trade of every other country GRATIS (why do I say that? Because NO other country has more than a few fighting ships, and even those that do like France rarely go long distances with them). When pirates patrol the Horn of Africa, who is there first? Not the Chinese, that’s for sure. When a tsunami hits or a nuclear power plant implodes, who is one of the first to respond? The US Navy of course, and certainly not the Chinese. The only way to reduce our defense spending is to stop being everyone’s momma and coming to the rescue–we have to reduce our obligations, and if that means some people die in some disaster, this is the price that will be paid when we aren’t doing it all.

NOW the administration wants to play down the numbers and point out the number of people NO LONGER looking for work dropped the headline number, after countless “single data points” showed “improvement” in unemployment. PLEASE PLEASE PLEASE if you know someone who drinks this swill, get them some much needed help.

Sourced from the BLS today:

U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force